Most airlines have adopted something known as advanced revenue management as part of their intelligent business solutions.
These are technologies that actually originated in the 1970s. Today, airlines make informed decisions about how to price tickets based on their true value in the marketplace. Despite this evolution, a large percentage of airline revenue actually comes from stuff other than the ticket: checked luggage, food and drinks on board, premium seating and amenities, and extra legroom.
Given the rising significance of these extra features, airlines have had to change things up, adding more than simple ticket revenue management methods to their operations. Airlines nowadays rely on intelligent and goal-driven customization.
Increase Revenue through Intelligent Business Solutions
Increasing total revenue relies on making the most of the information a customer provides during the booking process. This data can then be processed using trait level customization in which clients are stratified into areas, social demographics, etc.
Using this customization data helps develop a robust revenue management model that empowers airlines to provide value to their customers and maximize income.
In reality, the base ticket becomes just one item in a long line of services that airlines are concerned with. Airlines are using information from the sales of other services to provide customized offers based on their clients’ profiles. An airline can look at a number of factors that describe client behavior, such as a customer’s average book-to-flight time, their entry time at the air terminal, their number of luggage bags purchased, their party size, and other premium amenities purchased. All this data can be distilled into a custom offer that reflects an individual customer’s clear preferences and concerns.
A combination of services and the right price point can lead to an easy conversion. These technologies are starting to take off, especially in the more nimble, new low-fare carriers. Many of the legacy airlines are falling behind, however, and would be smart to catch up.
Below, we point out three steps that most airlines should follow to achieve a total RM model:
1. Adjust the organizational chart and break down silos to improve data visibility
Airlines, like all large firms, could use some leanness. Since many of the tasks performed by different offices require profound specialized ability, airlines have generally partitioned their operations up into separate entities. This is how much of the data and information is also stored. Ticketing does ticketing, marketing does marketing, and IT does IT. But breaking down the silos that separate your business operations can lead to much more usable information.
A full-scale revenue management model unites different aspects of the business to repair broken information.
2. Contract the important information science tasks
It’s one thing to have the information, but knowing what to with it is a totally separate task. You need someone who can process, analyze, and create value from your information. This may require creating a new analytics division or contracting out to an outside firm.
3. Start out with a pilot venture
Start things out with a little direct testing to figure out what works best for the airline. Trait level customization may very well be a long term process, but it can start with just a small scale project, targeting customers who like first-class seats or extra baggage.
To maintain their edge, airlines must continually improve their approach to marketing and market segmentation. Using their data in creative and proactive ways can make this goal a reality.